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Accelerating Your Path to Success
The best time to plant a tree was twenty years ago. The second best time is now.
—Chinese proverb
At this point, we hope you’re both inspired by the opportunity ahead and cognizant of the meaningful gaps that may exist on your path toward a different level of value creation. The seven leadership imperatives we’ve outlined and the stories of the twelve exemplars provide a road map and should give you confidence that you, too, can secure your company’s place in the world beyond digital. At the same time, we recognize that the seven imperatives may seem overwhelming. While each on its own could potentially be managed in the course of normal business, executing all of them together—or even a number of them—will require significant, sustained effort. There is no equivocating about this: the transformation of how you create value will not happen overnight—it is a multiyear journey.
All the statistics show that large-scale transformation programs often fall short of delivering on their promise. Big decisions that were meant to change the direction of the company get weakened because the future is felt to be too uncertain; options need to be hedged. Short-term performance pressures frequently divert attention and funding from the longer term. Executives, considering their remaining tenure, sometimes delay action. Legacy businesses keep getting the lion’s share of the company’s energy and resources. And organizations struggle under the weight of all the initiatives that were undertaken in the past and that disappointed.
So how do you succeed where others have failed?
You need to answer a series of questions: Do you believe in the future you’ve articulated? Are you going to hold your team and your organization accountable to deliver this future? Are you going to break through the challenges you will face—or let them encumber you? Are you going to accelerate and transform—or retreat to incremental steps?
Your most important task will be to provide the decisiveness and honesty required for each of the seven leadership imperatives. If you compromise now, as you start the process, you’ll send a signal that will undercut the power of everything you attempt from here on.
So, here are some mechanisms that can help you stay on the road that will get you from where you are today to where you want to be.
Mechanisms to Secure Your Path
Our experience is that organizations can easily focus on perceived areas of great urgency when embarking on a transformation—for example, racing to catch up with new products or services that competitors have launched. But urgency won’t sustain you, and a series of separate initiatives won’t get you where you want to go.
You need to begin by stepping back and working your way through the seven imperatives: reimagining your place in the world, your ecosystem(s), your privileged insights, your organization, your leadership team, your social contract with employees, and your own leadership style. While you may execute the seven imperatives in stages, it is important to be clear that they come as a package. Do just one or two, and you are likely to fall short or suffer through more pain than needed.
The seven imperatives have to be executed as a coherent effort. You cannot expect the company to work in new ways if you don’t engage people and change how you organize them to work. You cannot expect leaders to simply do more or change overnight; you must first reposition the leadership team. And you clearly cannot get anywhere if you don’t redefine your place in the world, including how it fits with others in your ecosystem (who will not be sitting still while you decide what to do).
The clearer you are about the seven imperatives as a package at the start, the more you will understand what it really takes to succeed and the more energy you will generate to power the effort. But you and your team must be brutally honest about the gaps that exist in any of the seven imperatives—not doing so is one of the biggest reasons for failure that we see in our research and our work with clients.
We borrow an expression from a colleague of ours, Gary Neilson, coauthor of the book Results. He says that, in transformations, it is critical to have “amnesty for the past.”1 We must allow all of our executives to focus on being clear about what is needed to succeed, rather than why they may not have addressed a gap before. If the list of gaps is long, so be it. You will have time to sequence, prioritize, and adjudicate tradeoffs to fill those gaps. But you cannot start out with a myopic view. You can’t convince yourself, or let others convince you, that a real gap somehow doesn’t exist or can be easily covered.
Even with great intentions, honesty and passion, you will, of course, make mistakes along the way, so we asked the leadership teams we studied to share the most important lessons they learned from the injuries and scars they sustained, as well as all the things they did right. While each of their stories had personal nuances, the commonalities were stunningly simple, yet enlightening. Here are the key lessons to consider as you take the next steps.
Partner with the board of directors on the imperatives. Undertaking a transformation carries significant risk for leaders. What if some of the assumptions about the market are incorrect? What if short-term performance takes too much of a hit? And what if the organization just doesn’t have the capacity to get to the destination?
A number of the CEOs we interviewed said it was key to their success that they engaged the board of directors up front around the way value would be created, the destination they were seeking, and the connected imperatives that would get them there. Boards often have a longer view of the organization and are likely to be considering these very questions. They may also be getting pressure themselves from outsiders, or applying pressure to management for some form of transformation. When you have conversations with the board, you will want to focus on the vision you have, the challenges of the current model and possible alternatives, the capabilities of the organization, and what could be achieved by going through the transformation.
Almost all the leaders we spoke to focused on the importance of being consistent about the goals as they went through the journey—especially when times were challenging. In some instances, the composition of the board itself was revised to bring new insights and energy. In others, each board meeting began with a recap of the progress against the total journey, helping to create ownership and support by the board. Regardless of the mechanism, creating clarity with the board about both the destination and the path to get there is key to powering and sustaining the needed change.
Engage key shareholders. Engaging key shareholders helps create the room for transformation, particularly if there will be economic tradeoffs such as short-term pain for longer-term success. Helping these shareholders understand the big problem you’re going to solve, why you are uniquely positioned to solve this problem, how you are going to get there, what the risks are in transforming (and in not transforming), and the expected impact on your company’s performance is powerful. In several instances, CEOs and CFOs told us they created an additional, unexpected drive for change when they shared the story of their planned transformation, including the time it would take, the uncertainties involved, and the multitude of efforts needed. While the executives thought they might be criticized for losing focus on quarterly earnings, they discovered that key shareholders are equally motivated by bold change, even when that comes with higher risk, and similarly do not want companies to mortgage the future for today’s benefit. Transformation is material for shareholders, and they expect companies to act now to secure the future.
Prioritize around customers. Your place in the world, the privileged insights you build into your customers and end users, the role you play in your ecosystems are all about creating value for your customers. Solving real customer problems and addressing real customer needs are the raison d’être for any transformation. Therefore, anchoring your change efforts in customers is the best way to create momentum. That is what gets everyone excited: employees, leaders, shareholders, ecosystem partners, and, of course, customers themselves. Before you begin mapping out how you can improve efficiency in the back office and cut costs by implementing new technology, focus your energy on how to turbocharge the differentiating capabilities that are at the heart of how you create value for customers. Build your digitization efforts around solutions that touch customers and around the front line of the organization that serves them. These frontline efforts often serve as the earliest tangible proof of the new value you can create. In many cases, they provide the stories around which you can catalyze action. Seeing how to win by making a difference for customers energizes people to change far more than initiatives you may undertake internally or corporate goals to “grow revenue” or “gain market share.” Even the leadership teams we spoke to who started their transformation efforts by focusing on solving an internal challenge emphasized the importance of anchoring the work in how it made a tangible difference to winning in the market.
Focus on capabilities and outcomes, not digital initiatives. Most of the differentiating capabilities you will need to build will inevitably require some technology. Start with blueprinting the amazing outcomes of each capability—and detail every element that must change, including data, systems, people, and process. When you do digitize, don’t claim victory once a new system or tool is in production—there is a lot more that needs to be done in terms of changing processes and upskilling people. Setting your targets around the end outcomes you are seeking to achieve (e.g., improved customer service, better forecast accuracy, improved business predictability) helps focus the whole team on delivering those outcomes instead of declaring victory for simply putting a piece of technology in place. An outcome focus also helps ensure that your investments are appropriately channeled and that your cross-functional teams feel a sense of mutual accountability to ensure the success of your investments.
Invest in your people from the start. The seven leadership imperatives put a lot of emphasis on engaging your people—the leaders around you and the people within your organization. The leadership teams we interviewed almost universally agreed about the importance of investing early on to engage people and power the change. However, the topic of engagement can often be picked up late or buried under a “change management” effort that is delegated. While the initial temptation can be to focus more on developing new digital solutions and creating new lines of business, these often cannot scale up fast enough to deliver competitive advantage. Meanwhile, employees seek to make a difference, and efforts to motivate them toward your new place can pay large dividends and counter what often becomes a fear that the change will leave them behind.
Helping your people transform as you develop the future of the company creates momentum that can make the change self-driving. Indeed, the most successful executives we interviewed stressed the importance of making sure people know that they are valued and said that helping them build their digital acumen, their skills, and their adaptability was more valuable than investing millions in developing new solutions. The new solutions, the new ways of working with customers, and the new ways of creating significant incremental value could only scale up meaningfully once the organization was ready to drive forward. In fact, some leaders commented on how empowering people to develop new skills led to new solutions and ways of working that would have otherwise taken significantly longer and cost significantly more. Investing in your people’s and your ecosystem’s ability to power the change early on is a catalyst for creating the competitive advantage you want.
Your people include your leaders, and we cannot emphasize enough how important it is to have the right leaders and the right leadership team in place to manage the transformation ahead. You must have the right leaders, with the right mindset around collective effort (no transformation we’ve seen comes as a result of individualist behavior alone). You also must have the right mechanisms in place to give the leadership team the space to drive all of the changes. Otherwise, it’s hard to imagine how you will be successful.
Separate the old from the new. Fixing the legacy business while at the same time standing up the new one may be more than one team can do. So, several companies adopt an operating model that separates the old from the new.
This can take many forms. Some put in place two separate teams: one figures out how to make the most of the legacy business, how to sustain significant cash generation, and potentially how to sell it off; the other focuses on how to develop the new business, how to build the required capabilities, how to create value with the new ecosystems. Other companies spin off or sell off the businesses that aren’t core. While the approaches may differ, the goal is the same: allowing the new business to develop without being held back by too much legacy.
The companies and leadership teams we studied emphasized enabling the new model to thrive and develop with its own rules. Constraining new business models and solutions with the structures, performance metrics, and systems of the old was universally seen as a sure path to failure. While it was of course helpful to be fed capabilities from the legacy business, the new ways of thinking and operating required for success could not be captured under the legacy models. New operating models were necessary—even if the changes were staged over time to allow for a stable transition from the legacy model to the future. Citigroup would not have been able to stand up the new bank without separating off legacy businesses into Citi Holdings. And STC Pay would not have been able to act like a speedboat had it stayed too close to the mother ship.
Some other companies went even further in clearly delineating the new from the old. They used trigger events and inorganic mechanisms to clearly signal a break from the past and a focus on the future. These changes helped challenge both internal and external stakeholders to question long-held beliefs about how to create value. Philips’s divestment of its foundational lighting business to focus on transforming health care was perhaps one of the starkest examples of declaring a break from the past. This very visible symbol of change generated new conversations and energy within the company hallways, and with investors, about what it would take to succeed. The break changed how people thought about the company and produced fresh focus on the future.
Regardless of the mechanism chosen, the resounding lesson learned was to move fast and early to separate the old from the new. No one we spoke to wished they had taken more time to stake out and scale up the new direction. Making a clear, quick break generated momentum. This does not mean that you do not honor, appreciate, or most importantly leverage the past. The legacy has a valued place, but the new simply cannot thrive in its shadow.
Aspiring to shape the future is part of our character as business leaders. Avoiding incrementalism is where real leadership is required. You already know you have a tremendous responsibility in your role. This is your opportunity to solve what most have not—delivering a meaningful future, addressing a fundamental customer or societal challenge, and actually seeing it through.
In the many moments where your own voice, and certainly that of others, will say, “We cannot get there,” “This is not for us,” “We’re already successful,” “We have a plan already,” and the myriad other comments that incite incrementalism, we know you will be reminded of the great stories of transformation and of the great need for you, at that moment, to help your people see the potential in a world beyond digital.
The legacy you leave for yourself, your organization, and the rest of us depends on it.